Aloisio Milani and Vitor Abdala
Reporters - Agência Brasil

Rio – The relationship between Petrobras and Bolivia goes back before the governments of Luiz Inacio Lula da Silva and Evo Morales. Brazil's state-run oil giant signed a contract with the Bolivian state-run oil company, Yacimientos Petrolíferos Fiscales Bolivianos (YPFB), as far back as 1991, although it has been operating in Bolivia only since 1996, when it began making large investments there. During the decade it has operated in Bolivia, Petrobras has invested some US$ 1 billion; however, only around US$ 68 million was spent during the Lula government.

Of course, the biggest and most important investment made by Petrobras was the gas pipeline connecting the two countries (gasoduto Bolívia-Brasil) which stretches for over 3,100 kilometers, almost 2,600 of them in Brazil.

Until Monday, May 1, when president Evo Morales nationalized his country's energy sector, Petrobras controlled 46% of Bolivia's natural gas reserves, produced all the gasoline and diesel fuel used in that country, had made 20% of all foreign direct investments in the country and its various economic activities accounted for around 18% of Bolivia's GDP.

In commments yesterday, president Lula admitted that Brazil had made a "strategic error" in depending on Bolivia for over half its needs for natural gas. "It is not a good idea to be so dependent on one source for so much of our energy. And a source that is not ours," said Lula.

Translation: Allen Bennett